The Taiwan High Court rendered the 104-Jin-Shang-Su-44 Criminal Decision of January 12, 2016 (hereinafter, the “Decision”), holding that to determine if a security is bought for a high price illegally, attention should be paid to the bid price of the actor and the purchase price in the market rather than a comparison with the market selling price.
According to the Decision, Article 155, Paragraph 1, Subparagraph 4 of the Securities and Exchange Act stipulates that for securities listed on the stock exchange, the trading price of any specific security on the centralized stock exchange shall not be intentionally inflated or deflated through continuous purchase for high prices or sale for low prices in the name of the trader or another person in order to prevent any person from manipulating share prices to the extent of causing abnormal changes in the prices on the centralized stock market and undermining market order. The term “continuous” as mentioned above refers to multiple successive acts over a certain period of time but is not preconditioned by uninterrupted daily occurrence. With respect to the “continuous purchase for high prices,” it does not matter if purpose is not to inflate the prices to sell securities or to deflate the prices to purchase securities but to prevent the prices of the securities placed as collateral from forced liquidation as a result of declining security prices or to attract investment by creating a facade of corporate prosperity through all kinds of trading ploys to manipulate prices. Regardless of whether the purchase price is higher than the average purchase price, as long as the prices of specific securities can be maintained at a fixed price level to illegally attract other to such specific securities and such artificial manipulation has kept the price level from falling, since such acts can effectively inflate prices, they are prohibited illegal acts of speculation conducted by buying securities for high prices. Therefore, an illegal act of purchasing securities for high prices under Article 155, Paragraph 1, Subparagraph 4 of the Securities and Exchange Act is determined primarily by a comparison between the bid price and the market purchase price but not by a comparison between the bid price and the market selling price. In other words, attention should be paid to whether the bid price of the defendant is the limit up price, the highest average price of the buyer or close to the top price of the buyer.
In addition, to determine if an actor intends to inflate or deflate the price of a specific security, not only whether the actor buys the security for a high price and sells the security for a low price may be considered, but also objective acts such as whether the actor continuously buys a large number of the specific security over a short period of time, whether the trading volume (value) accounts for a rather high percentage of the total trading value of the stock on the day, whether speculation targets unpopular stocks or small cap stocks, whether the purchase price causes share price volatility, whether the closing creates the illusion of active trading of the stock or whether any dummy account is used may be referenced for determination.
According to the Decision, the court held that the Defendant continuously, for his own account or through the accounts of multiple individuals, purchased a lot of LemTech’s shares for bid prices higher than or equal to the closing prices of the stock at that time, for bid prices higher than the best five bid prices disclosed at the time or the lowest of the best five selling prices disclosed at the time over a certain period of time, it is obvious that the Defendant has subjective attempt to inflate LemTech’s share prices. In addition, the Defendant’s continuous purchase of LemTech’s shares for high prices over a short period of time affected the intraday, opening and closing prices of LemTech’s shares. This was not only likely to affect market prices or market order but also actually impacted market prices and order. Therefore, this offense was constituted.